Asked by Anonymous
Updated 3w ago
Top Contributor (May)
Bond funds over individual bonds, and Actively managed over Passively Managed.
A bond index is created without friction. There's no trading costs placed in. However in the application of an index, ETFs suffer from cost implementation of high quantum bonds as there's higher turnover in a bond ETF than a bond fund.
Bond funds also charge pretty low, and net of fees performance they tend to outperform ETFs. They may not outperform the index, but they outperform the ETF that never outperforms the index either.
I personally would prefer Bond ETF over bonds.
1) Bond ETFs would be able to provide a form of diversification.
An ETF would allow you to own many different bonds in an index at a purchase price that is much lower than investing in each of them individually. Diversification is important when it comes to investing thus with Bond ETFs giving this advantage, i would choose it over bonds.
Bond ETFs can be bought anytime during the trading day while individual issues are likely to be traded much less frequently.
3) You will be able to receive returns more often
Instead of getting every six months, bond ETFs usually pay interest monthly thus you will be able to receive cash from month to month. Even though the value varies each month, monthly payments can give bond youa more regular income stream to use or reinvest.
But of course both comes with risks so it is important to know both investments well and understand their risks before deciding on which to invest in!